As China leads the world in smartphone shipments, top handset vendors are raising their stakes in the nation, and will likely bring more exclusive products and lower-end devices to the market, resulting in fierce competition, according to analysts.
Several research firms are reporting that China has surpassed the U.S. in smartphone shipments or sales, with some of them seeing the trend since last year's third quarter. Analysts expect China to continue leading the market given that the country already has 1 billion mobile phone subscribers, with only about 15 percent of them on the nation's faster 3G networks.
"There is still plenty of room for it to grow," said Nicole Peng, an analyst with research firm Canalys. At the same time, other key regions including the U.S. and Europe already have mature markets, and are still recovering from weak economic conditions. "So China will be a very important engine for smartphone growth this year," she said.
In this year's first quarter, China's smartphone shipments saw a 102 percent year-over year growth, according to Canalys. The U.S. shipments, in contrast, grew by only 5 percent.
China's emergence as a top smartphone market represents a shift from the country primarily being a major manufacturer of mobile phones for overseas markets, analysts noted. Now handset vendors are spending greater resources in the country's smartphone space, whether it be Apple launching the iPhone 4S on China Telecom, Nokia moving its Asia Pacific headquarters to Beijing, or HTC launching smartphones exclusively for China.
But to attract more customers, handset vendors will need to focus on China's low-end market, where smartphones are often priced at 1,000 yuan (US$158) without a contract, according to analysts.
For this year, China's smartphone sales are projected to reach at least 140 million units, up from 77 million in 2011, said CK Lu, an analyst with research firm Gartner. Much of the growth will occur with no-contract smartphones priced between 1,000 and 1,500 yuan, he added.
"3G smartphones will be hitting a price where users can replace their 2G feature phone with a 3G smartphone," Lu said. "It will be a huge replacement, with people moving from 2G phones to 3G smartphones."
This will mean more lower-end phones reaching the Chinese market, resulting in price decreases. Thomas Kang, an analyst with Strategy Analytics, said prices could begin reaching at $75 to the $150 range. This contrasts with the U.S. market, where consumers generally buy smartphones that cost between $350 to $500 without a contract.
In the future, more international handset vendors will also likely choose to launch their products first in China, or decide to release smartphones exclusively made for the Chinese market, said Teck Zhung Wong, an analyst with research firm IDC. "The potential for the Chinese smartphone market is so huge, they have no choice but to accommodate the demand," he said.
"One negative thing of putting all this focus on China right now is that it's going to be an ultra-competitive market," he added. "Anyone who is looking at entering the China market has got to prepare for a brutal fight."
In the first quarter, Samsung Electronics had the largest smartphone market share in China at 22 percent, with Apple in second place at 19 percent, according to Canalys. Nokia, ZTE and Huawei Technologies had market shares each at about 10 percent.
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